Australian dollar lower as Ukraine tensions increase

THE Australian dollar is lower as more worries about tensions between Russia and Ukraine overshadow positive US economic data.

At 0700 AEDT on Monday, the local unit was trading at 90.36 US cents, down from 90.90 cents on Friday.

Russian state company Gazprom has increased the pressure on Ukraine’s new government by warning that if Ukraine doesn’t pay its debts, Russia could cut off wider supplies to Europe.

BK Asset Management managing director Kathy Lien said markets were initially positive about data showing that 175,000 jobs were added to the US economy in February but that changed after Russia made its threat.

“Equities traded sharply higher on the relief that non-farm payrolls did not miss expectations for the third month in a row,” she said.

“The sell-off was triggered by the one major uncertainty that has been hanging over the markets for the past few weeks and that is Ukraine.

“Considering that the Russian government owns a controlling interest in Gazprom, the world’s largest single gas producer, this threat is clearly representative of political posturing.” Ms Lien said the strong US employment data increases expectation that the US Federal Reserve will continue winding back its economic stimulus programs, which will further boost the US dollar and put downward pressure on the Australian dollar.